If that is correct, I wonder why there is another player in the already crowded virtualization camp? What does LXC provide (or promise) that linux-vserver doesn't have?

I'm a long time linux-vserver user, I remember it was around many years ago before all this virtualization hype. Development slowed down in recent times, but never totally stopped - I know because developers helped me to bring it back to a useful state on linux/hppa (in Gentoo, at least). They regularly push out patches against the latest kernels, using all the latest goodies (the same container infrastructure used by LXC) and even integrating with GRsecurity.

People who started the LXC effort probably had a good reason to do so instead of joining the already well established linux-vserver base? Then I'd like to know.

Is it all about mainline integration? Then why not adapt linux-vserver for integration, like Xen people are doing with XenLinux?

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Kernel integration isn't just about addressing a desirable feature, but more about making minimally intrusive changes with little downside in the way of performance, code quality, complexity, and future compatibility. Politics are also involved on both sides, and a good relationship with established developers helps get long term commitment and constructive reviews.

It looks like the LXC project figured it out. That said, I don't know the specifics of why previous projects like OpenVZ and linux-vserver didn't get in. Those projects at least provided some experience, justification, and maybe code that proved useful to the goal of mainline lightweight containers.